2021 has been a very weird year. Inflation has boomed (highest in 40 years) after the election of Joe Biden as President of the USA (call it Bidenflation). Then we have The Federal Reserve barely acting on the booming inflation (keeping rates at 25 basis points while withdrawing the COVID-related monetary stimulus).
Given the volatility of GameStop (Reddit-inspired), you can see the strange shape of GameStop’s volatility surface.
By contrast, gold is now where it was was at the beginning of 2021 and the surge of Bidenflation.
Here is volatility surface for gold.
So, there are a number of meme stocks (GameStop is just one example), gold, silver, cryptos such as Bitcoin and Ethereum. But gold seems to be placid with respect to inflation, but the meme stocks and cryptos seem to be motoring. Or is it rage against the financial machine? Or rage against Bidenflation??
The US stock and bond markets are closed today and tomorrow, Christmas day.
Have a Merry Christmas! And celebrate the “Santa Pause” as Powell refuses to raise rates to combat inflation until 2022.
Since President Nixon helped take the US off the gold standard, the US Dollar has become FIAT currency. That is, not backed any precious asset such as gold, silver, platinum, etc. What ever happened to the Bretton Woods system?
So much for Bretton Woods. We now live in a FIAT world where The Federal Reserve can print money almost without any limitation.
Enter cryptocurrcies such as Bitcoin and Ethereum.
Bitcoin, the favorite of many, broke through the $50,000 barrier yesterday, only to level off below $50,000 this morning. Ethereum is level after rising yesterday. Meanwhile the US Dollar (the preferred FIAT model of The Federal Reserve) is falling.
Here are some of the cryptos out there, but I only follow Bitcoin and Ethereum.
Since Nixon and dropping off the gold standard, we have seen US Federal debt (and spending) blow out of control with the decline in M2 Money Velocity to its lowest levels.
This should be the new emblem of the US Federal government AND The Federal Reserve.